The lack of reserves in the banking system has sounded the alarms for Credit Suisse’s Zoltan Pozsar. The analyst thinks regulations weighing on the global banking industry are “shaping up to be a severe binding constraint.”
“If we’re right about funding stresses, the Fed will be doing ‘QE4’ by year-end: the safe asset – U.S. Treasurys – is funded by [relative value] hedge funds on the margin and if the [currency] swap market pulls balance sheet and funding away from them, the safe asset will go on sale. Treasury yields can spike into year-end, and the Fed will have to shift from buying bills to buying what’s on sale – coupons,” Pozsar said.
A concern regarding quantitative easing (QE4 – the 4 refers to phase 4) is that the increased money supply and low interest rates encourage further borrowing by consumers and businesses alike. While some debt can help stimulate the market, extravagant loans and too much debt can further exacerbate an already shaky economy.
So, there might be uncertainty ahead, but according to Credit Suisse, there are also a number of stocks set to reward investors handsomely in the coming year. With the help of TipRanks’ trusty Stock Screener, we locked in on 2 stocks the Swiss bank’s analysts believe are set to soar in the next 12 months. Furthermore, both stocks currently have a Strong Buy consensus rating from the Street.
If the talk about a downturn in the economy does materialize, one company well equipped to deal with a fragile market is telecommunications and media conglomerate, Comcast.
Although a recession could cause a migration of consumers from cable and broadcast TV to the fledgling streaming TV market, Comcast is ready for such a scenario, as it is getting to ready launch Peacock, its own streaming service, in April 2020.
With all the talk of cord-cutting, Comcast’s cable communications sector still represents half of the company’s revenues and two thirds of its adjusted profits, with high speed internet connection powering more than 50% of its customers’ cable packages. With broadband connections becoming almost a staple among consumers, increasing by hundreds of thousands in each quarter, sales are unlikely to hit a brick wall should a recession hit. Moreover, Comcast’s cable communications division grew by 4% during the last quarter. The company also pays out a dividend of $0.84 annually, with the yield coming in at 1.93%, further keeping investors happy.
Comcast is up 27% year-to-date, and Credit Suisse’s Douglas Mitchelson thinks the growth is set to continue. The 5-star analyst said, “We believe shares are inexpensive relative to peers, especially given the quality of the company’s assets, that investors can look forward to a likely return to share repurchases in 2021 post balance sheet refresh, that Cable operating momentum and cable cash flow improvements should continue for some time, and that NBCU/Sky investments are rational and should help hold up those businesses post-2020.”
Accordingly, Mitchelson reiterated an Outperform rating on the media giant, alongside a price target of $55, implying ample upside potential of 27%. (To watch Mitchelson’s track record, click here)
What does the Street make of Comcast’s prospects? As it happens, the Street agrees with Mitchelson. A breakdown of 14 Buys and 2 Holds provides Comcast with a Strong Buy consensus rating. Should the analysts’ average target price of $52.93 be met, gains of 22% could be in place over the coming 12 months. (See Comcast stock analysis on TipRanks)
Forty Seven Inc. (FTSV)
Did immuno-oncology biotech Forty Seven hear Credit Suisse thinks its share price is about to soar? Probably not, yet that’s exactly what happened.
On December 9, the biotech announced encouraging updated clinical data from its ongoing phase Ib trial assessing Magrolimab in combination with Azacitidine for the treatment of myelodysplastic syndrome (MDS) and acute myeloid leukemia (AML).
The results showed that the combination of Magrolimab and Azacitidine is highly active and well-tolerated in patients with MDS and AML. Magrolimab is a humanized monoclonal antibody targeting CD47, which is a “don’t eat me” signal to macrophages and is expressed on all cells.
As is de rigueur in the biotech sector, the stronger than expected good news caused the stock to skyrocket by 111%.
The company’s novel approach of finding more compassionate and effective ways to fight cancer is working, and Credit Suisse’s Martin Auster thinks there is more fuel in the tank for the promising biotech. The analyst noted, “We think the ASH clinical updates are de-risking for the MDS opportunity, and suggest potential upside opportunities for Magrolimab in additional settings over time. We are increasing our PoS in MDS to 75% (from 40%), adding value to our pipeline to account for further MDS/AML optionality, and raising the M&A weight in our TP from 50% to 67% based on additional clinical validation and increased scarcity value for Magrolimab.”
To this end, Auster reiterated an Outperform rating on FTSV, and raised his price target from $18 to $38. Following the outrageous recent spike in the share price, the target still leaves room for a further 6% uptick. (To watch Auster’s track record, click here)
The rest of the Street is behind Auster’s call, too, as Forty Seven currently has the analysts’ unanimous support. A Strong Buy consensus rating is represented by Buys only, specifically 9 of them. The average price target is $39.25, suggesting upside of 10%. The price, though, doesn’t take the recent surge into account. (See Forty Seven stock analysis on TipRanks)
Check out these 5 ‘Strong Buy’ stocks that top Wall Street analysts recommend